ECO 365 Week 4 Knowledge Check

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ECO 365 Week 4 Knowledge Check
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• 1. What do economists mean when they say there is
  "market failure"?
• Business has introduced a product that consumers
  did not want.
• Free markets have led to excessive profits.
• Markets have surpluses or shortages so that
  government rationing is necessary.
• Free markets yield results that economists do not
  consider socially optimal.
• 2. If a market has no externalities, marginal
  private costs
• exceed marginal social costs
• equal marginal social costs
• are below marginal social costs
• intersect marginal social costs

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• 3. Economists generally call the effect of an
  agreement on others that is not taken into
  account by the parties making the agreement
• an externality
• welfare loss
• Pareto optimality
• excess burden
• 4. The size performance improvements sought by
  those pursuing horizontal mergers is
• economies of scale
• increased market share
• to coordinate activities more efficiently to spur
  growth
• to decrease competition

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• 5. A company buys another company in the same
  supply chain, but either in front of it or behind
  it in the supply chain. This is called
• a horizontal acquisition
• a vertical acquisition
• a conglomerate
• a joint venture
• 6. Sony and Toshiba become partners in a
  microprocessor manufacturing company. This is
  called
• a horizontal acquisition
• a vertical acquisition
• a conglomerate
• a joint venture

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• 7. If two companies share ownership in a venture
  and agree on a formal management structure
  including members of both companies, this is
  called a
• horizontal acquisition
• vertical acquisition
• joint venture
• 8. Two companies come together to take on a
  project that has an explicit time cycle and
  ending point. The most efficient form of
  acquisition of this project is
• a horizontal acquisition
• a joint venture
• a vertical acquisition
• a conglomerate

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• 9. The more elastic the supply and the demand
  curves are,
• the smaller the shortage a price ceiling will
  create
• greater the shortage a price ceiling will create
• smaller the surplus a price ceiling will create
• greater the surplus a price ceiling will create
• 10. Assuming a binding price floor, the more
  elastic the supply and demand curves are,
• the smaller the shortage a price floor will
  create
• greater the shortage a price floor will create
• smaller the surplus a price floor will create
• greater the surplus a price floor will create

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